Supply Network (ASX:SNL) Will Pay A Larger Dividend Than Last Year At A$0.38
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
Supply Network's Future Dividend Projections Appear Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Supply Network's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 114% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.
The next year is set to see EPS grow by 61.4%. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.
View our latest analysis for Supply Network
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was A$0.09 in 2015, and the most recent fiscal year payment was A$0.65. This means that it has been growing its distributions at 22% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Supply Network has grown earnings per share at 32% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Supply Network hasn't been doing.
Our Thoughts On Supply Network's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Supply Network that investors need to be conscious of moving forward. Is Supply Network not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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